June 17th, 2006

Increasing Advertising’s Low Return on Consumer Attention

by

Search advertising was revolutionary because it created a new science of ad relevance — the old targeting tools of demographics and psychographics seem like a shot in the dark by comparison. On the face of it, the value proposition of search advertising makes perfect sense — ads are chosen based on key word relevance — a consumer is searching for something, and search advertising delivers ads with produce/service offerings related to that search.

But despite this huge innovation, search advertising still provides a relatively low return on consumer attention — in ad brokering systems like Google AdWords, which are based on auctions, relevance is often in conflict with revenue per click. AdWords must balance the likelihood of a click — and its correlation with relevance — against the amount of revenue Google receives for that click. And advertisers who win the key word game can direct consumers to sites that may not be fully relevant to the actual intent of their searches.

Let’s look at a specific example. I’m thinking about buying a video camera, but I don’t want to spend too much. So I Google “best inexpensive digital video camera” (I may be cheap, but I still want the best I can get):

Google Video Camera Search

So now I have two options:

1. Explore the “organic” results for reviews to help me choose which camera to buy
2. Explore the “sponsored links,” i.e. the ads

The headlines of the sponsored links sound good — “Best Video Camera,” “Inexpensive Video Camera” — but if you try the search and click on any of the links, you’ll find that there’s no way to know whether you’re getting the “best” or the most “inexpensive” video camera.

What I’m getting is not the “best inexpensive digital video camera” but rather offers from the best gamers of the AdWords system with the deepest pockets.

But here’s the bigger problem: In my search for the video camera that I will ultimately purchase, money will change hands between advertisers and intermediaries as my attention — and my intention to buy — is “monetized.” But not a dime of that ad money will make it into my pocket.

It’s MY attention, MY intention, and MY purchase — Google and other intermediaries will make all the money, and I won’t see a dime.

In a previous meditation on this problem I wrote:

Imagine a Robin-Hood-like application that could somehow take a percentage of the revenue that we generate through our attention and redistribute it to us. Imagine if Google had to pay YOU for the attention that you give each AdWords advertiser when you click.

JellyfishThe other day I spoke to Brian Wiegand and Mark McGuire, who have dreamed up just such an application, which they call Jellyfish (more transparency, etc.). Here’s how Mark describes it in the Jellyfish blog:

I think we will soon reach a tipping point where consumers are going to realize that when it comes to their buying intentions, search intermediaries like Google/Yahoo/MSN (and a host of vertical engines) are keeping too much value for themselves (advertising $’s) without delivering a corresponding increase of value to the consumers participating in this system.

At Jellyfish, we want to be this tipping point. We think the way to do so is to fix the underlying advertising model to align the incentives of all three parties involved in a sale (buyer, seller and intermediary). The advertising market does a good job of maximizing the value your intention (GYM have PPC auctions that do this everyday); it just hasn’t done such a good job of fairly allocating that value among the key stakeholders. In our marketplace, we plan to allow the existing advertising system to set a value on your intent to buy, but that value (e.g., your intention currency) will flow to you, to the advertiser, and to us only when we do a good job of using that intent (and your historical buying intentions) to connect you to the product or service that is right for you. This will happen seamlessly and without you even thinking about it in terms of driving a maximum return on your buying intention. In the transparent marketplace at Jellyfish, advertising will transform into intention currency and that currency will be used to efficiently match buyers and sellers.

And this is the way we think the attention economy will start to catch on for the masses: By integrating its core concepts into an easy to use application that has direct, tangible benefits to the end consumer and advertiser alike. The average consumer may not think about it as intention currency, but we hope the increased value to that consumer will ensure that she continues to come back each time she has intent to buy something online as opposed to just an intent to search for information.

Brian and Mark shared with me the details of how Jellyfish works, which got me more jazzed than I’ve been in a while about the prospect of some game changing evolution. I promised not to disclose the details pre-launch, but that should happen any day now, and I’m eager to delve in once they’re live.

The folks at AttentionTrust have of course been all over the return on attention issue — in fact, they have an interview with Mark.

What we need to really change the attention game — and to dramatically increase advertising’s return on consumer attention — is a way for AVERAGE PEOPLE to increase their skin in the game “seamlessly and without you even thinking about it.” We’ll soon see whether Jellyfish can seize this opportunity.

  • First of all advertising media provides space for companies to compete against each other on price and benefits. If one advertiser offers a candy bar for $1.00 and another offers a candy bar for $0.90 consumers will usually buy the cheaper one. If two items are equivalently priced, then the company that can present its benefits to its market will win the sale. Without a marketplaces consumers are not aware of pricing and benefits.

    Competition reduces prices. For example, due to efficient manufacturing methods, Company A makes a candy bar for $0.90, while Company B makes an equivalent bar for $1.00. Both companies can sell their bar for $1.10 in the market. Company A can invest more in advertising, and sell more of its product. Company A can then take advantage of economy of scale, and manufacture the bar for less.

    To compete, Company B has to either 1) improve the efficiency of its marketing, or 2) improve its total business processes. Say it improves its manufacturing so that it produces the bar for $0.90 (same as company A). Now both companies are competing soley on marketing ability. They will both work to improve their efficiency of their marketing message, and its delivery. Ultimately, as a result of this competition prices will fall (or prices may stay the same, but benefits will rise).

    Look at cars: Due to competition (and heavy advertising of benefits) the features you can get on a cheap car now include air conditioning, lots of gadgets and a host of saftey features.

    You have a paradox in your post: How can all those irrelevant ads save me time? The point is that you judge them to be irrelevant very quickly. I am pretty sure that you only check the first few Adsense ads on a page, and ignore the rest.

    To paraphrase Winston Churchill: Advertising is the worst form of gaining attention...except for every other form that's been tried.

  • Mark,

    When you do a search on Google, how is competition among advertisers that appear on the results page driving down prices for consumers? Prices typically aren't even listed in AdWords ads.

    How can you possible argue that all of the irrelevant advertising message I'm being bombarded with all day long is actually saving me time? It's a massive waste of time. Even AdWords with all its claim to "relevancy" still bombards me with irrelevant messages.

    How about some concrete examples of how this works?

  • Whatever their philosophy is, it means little without actual details of how their site actually works. This is especially true when they claim to overturn existing advertisng models with their system. So many sites have had great ideas, but have failed when the product actually reached market. The road to hell is paved with good intentions ;)

    You have misread my analysis. I did not say that all value accrues to the intermediary. I said the oppposite. Consumers receive direct benefits when corporations compete to advertise to them.

    The first benefit to consumers is that competition between advertisers drives prices down, and rewards more efficient companies. The second benefit is that competition to create better advertising messages ultimately saves consumers time.

  • Mark,

    First, I wasn't profiling the Jellyfish so much as their philosophy, which is why quoted from their blog -- I think their ideas and their philosophy have merit on their own, regardless of how well they execute. Much of what I do on this blog is talk about ideas. Besides, ever TechCrunch sometimes does posts without specifics, such as the profile of Yahoo's Hack Day -- it's Yahoo's philosophy of quick innovation that was being profiled, not the specific ideas.

    Second, as to your economic analysis, you're assuming that the traditional advertising model, where all of the economic value accrues to the intermediary, and where there is a huge amount of waste in irrelevant message delivery, is in fact the most efficient way to drive sales. You're also assuming that plowing profits into more advertising is the most efficient way to create more value for customers, which is what ultimately drives sales. I can't comment on your last paragraph because I don't really understand what you're saying there.

  • Scott,

    Profiling companies without telling us how their product actually works is simply adding to the generic Web 2.0 hype. If you are going to profile a company, please either give enough details about their business model for your readers to make a reasonable assesment, or leave it until the public announcement.

    By the way, your analysis of Adwords is wrong.

    What I’m getting is not the “best inexpensive digital video camera” but rather offers from the best gamers of the AdWords system with the deepest pockets.

    But here’s the bigger problem: In my search for the video camera that I will ultimately purchase, money will change hands between advertisers and intermediaries as my attention — and my intention to buy — is “monetized.” But not a dime of that ad money will make it into my pocket.

    Where does the money in those "deep pockets" come from? The company that has the most efficient production and distribution will have the most money left over for advertising. The reward for efficiency is more advertising, and more sales. This leads to economy-of-scale which drives prices down across the whole industry.

    As a consumer, you benefit from ad competition by vendors in two ways 1) lower prices and 2) less time to take a decision. (Advertising is communication, and if a company can communicate its benefits more quickly, then that is a major benefit to the consumer.)

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